Time to seriously consider getting defensive?

[HFWR]

The Reformed Broker

 

[audreyh1]

Another amusing article vis-a-vis MSM financial pundits: Jason Kelly | Ignore All Forecasters

He calls them "z-vals" - zero value forecasters (i.e. no credibility whatsoever). LOL!

Good reminder to ignore the talking heads!!!

 

[Milton]

Snooze city and I cannot even be bothered to click the link. Come on, reading doom and gloom voluntarily? Go outside and play in the sunshine for a while if it is getting to you.

+1.

 

[aja8888]

Another amusing article vis-a-vis MSM financial pundits: Jason Kelly | Ignore All Forecasters

He calls them "z-vals" - zero value forecasters (i.e. no credibility whatsoever). LOL!

Good reminder to ignore the talking heads!!!

I was watching when Gartman made the call on the 15 minute change. I used to think this guy had credibility, but I can only assume he was on drugs when he made that call.

 

[audreyh1]

I was watching when Gartman made the call on the 15 minute change. I used to think this guy had credibility, but I can only assume he was on drugs when he made that call.

He had already given me whiplash a couple of times prior, so this just made me and then just a couple weeks later he's the most bullish in the room .

I really try to avoid it, but I inadvertently pick up some of these calls because I use the CNBC app in my iPad, and you get exposed to headlines now and then. The app is great as long as you ignore what CNBC considers "news".

 

[aja8888]

I used to value Gartman for his calls on the direction of commodities since I play in that area (lightly). I also work in the industry. His calls on the direction of crude oil were what I watched for. Now it seems those are 15 minute calls also.

He keeps saying "buy the things that will hurt if they fall on your foot" (metals), but his call has not been rosy. Until we have a real world-wide surge in industrial production and consumption, basic metals will not go anywhere.

 

[crtreedude]

I have been pretty good in my estimates by thinking we are in a Slinky economy, and have been ever since 2007. Things are moving down, due to energy costs, and there is no source of cheap energy on the horizon. The economy runs on energy - the boom times for the USA was when we had our own energy, we have been hurting ever since the 70s, though the boom / bust cycles have been hiding it.

But over all, things have been moving down, with recoveries, but the recoveries aren't really going back up, just slowing down the downward for a brief period of time.

I think this is the new norm, until we figure out a new source of energy and resources. All resources are now owned, there are no new continents to exploit, so booms aren't due to finding more resources, but mainly speculation, which is bubble, bubble, toil and trouble...

At least, this is what I am seeing.

(disclaimer - I am not a financial advisor and am not selling anything, just my dos colones, which is only worth 1/5 as much as two cents. )

 

[6miths]

I should have gone in harder at market bottoms.

... cuz you knew where they were at the time?

 

[CaliforniaMan]

I have been pretty good in my estimates by thinking we are in a Slinky economy, and have been ever since 2007. Things are moving down, due to energy costs, and there is no source of cheap energy on the horizon. The economy runs on energy - the boom times for the USA was when we had our own energy, we have been hurting ever since the 70s, though the boom / bust cycles have been hiding it.

But over all, things have been moving down, with recoveries, but the recoveries aren't really going back up, just slowing down the downward for a brief period of time.

I think this is the new norm, until we figure out a new source of energy and resources. All resources are now owned, there are no new continents to exploit, so booms aren't due to finding more resources, but mainly speculation, which is bubble, bubble, toil and trouble...

At least, this is what I am seeing.

(disclaimer - I am not a financial advisor and am not selling anything, just my dos colones, which is only worth 1/5 as much as two cents. )

It is good that you are pretty good at your estimates, but you must have missed the information on the U.S. energy boom that is going on right now. Last year the U.S. was predicted to become the world's largest energy producer by 2015, surpassing even Russia and Saudi Arabia due to the new technologies being used in oil and gas production, with energy independence coming soon. America's relatively abundant and low cost energy is one of the reasons Kurtzman gives in his book "Unleashing the Second American Century" for continued American growth. Couple that with the continued decrease in the cost of solar energy and continuing innovation in all areas of energy production and it is hard to see a reason for gloom here.

 

[audreyh1]

I have been pretty good in my estimates by thinking we are in a Slinky economy, and have been ever since 2007. Things are moving down, due to energy costs, and there is no source of cheap energy on the horizon. The economy runs on energy - the boom times for the USA was when we had our own energy, we have been hurting ever since the 70s, though the boom / bust cycles have been hiding it.

But over all, things have been moving down, with recoveries, but the recoveries aren't really going back up, just slowing down the downward for a brief period of time.

I think this is the new norm, until we figure out a new source of energy and resources. All resources are now owned, there are no new continents to exploit, so booms aren't due to finding more resources, but mainly speculation, which is bubble, bubble, toil and trouble...

At least, this is what I am seeing.

(disclaimer - I am not a financial advisor and am not selling anything, just my dos colones, which is only worth 1/5 as much as two cents. )

Yeah - you have totally missed the US energy boom of the last 5 years!!! I suggest you research your assumptions.

Energy boom to aid U.S. urban manufacturing jobs to 2020: report | Reuters

 

[Mulligan]

Yeah - you have totally missed the US energy boom of the last 5 years!!! I suggest you research your assumptions.



Energy boom to aid U.S. urban manufacturing jobs to 2020: report | Reuters

And I hope it lasts! However, just reading in the paper today how government is putting the screws to coal industry and many utilities are shutting them down. Putting pressure on natural gas, which is more volatile in price than coal. They were estimating electricity prices in future to outstrip inflation. Who knows... Fortunately my "footprint" is small enough that if/any increases occur, they will just annoy me more than break me.


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[haha]

And I hope it lasts! However, just reading in the paper today how government is putting the screws to coal industry and many utilities are shutting them down. Putting pressure on natural gas, which is more volatile in price than coal. They were estimating electricity prices in future to outstrip inflation. Who knows... Fortunately my "footprint" is small enough that if/any increases occur, they will just annoy me more than break me.


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I'd like to read that. Can you link?

Ha

 

[aja8888]

And I hope it lasts! However, just reading in the paper today how government is putting the screws to coal industry and many utilities are shutting them down. Putting pressure on natural gas, which is more volatile in price than coal. They were estimating electricity prices in future to outstrip inflation. Who knows... Fortunately my "footprint" is small enough that if/any increases occur, they will just annoy me more than break me.


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I think what you are seeing with coal is the prohibitive cost to outfit a NEW generating facility with NOx and SO2 controls to meet current emission standards. Older plants are grandfathered into old rules. There are still a lot of coal-fired generating plants in operation. New coal plants probably won't be built. Nuke plants will be, however.

Some generating facilities are installing peak generators to handle high demand loads using natural gas fired equipment. There's lots of gas, just not all in the right places so this will vary.

As far as crude oil production, horizontal drilling techniques have made the industry very productive since now a well can exploit a large payzone and do this in multiple runs, versus a straight vertical well that is screened for production in a narrow payzone.

We will be past Iraq and Iran in production in Texas alone in 2015+. Getting crude output greater than Russia or Saudi Arabia will take up to doubling the current production. If that happens, we will have to sell crude oil as the U.S. demand will be overtaken. One unfortunate thing though, is we don't have enough refining capacity to handle today's demand and therefore have to import refined products and will do so in the future even though we will have enough crude oil to surpass US demand.

 

[Mulligan]

I'd like to read that. Can you link?

Ha

I use old school paper Ha, but I found it on the online version here in STL Post Dispatch. U.S. electricity prices may be going up for good : Stltoday

U.S. electricity prices may be going up for good

As the temperature plunged to 16 below zero in Chicago in early January and record lows were set across the eastern U.S., electrical system managers implored the public to turn off stoves, dryers and even lights or risk blackouts.

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[haha]

I think what you are seeing with coal is the prohibitive cost to outfit a NEW generating facility with NOx and SO2 controls to meet current emission standards. Older plants are grandfathered into old rules. There are still a lot of coal-fired generating plants in operation. New coal plants probably won't be built. Nuke plants will be, however.

Some generating facilities are installing peak generators to handle high demand loads using natural gas fired equipment. There's lots of gas, just not all in the right places so this will vary.

As far as crude oil production, horizontal drilling techniques have made the industry very productive since now a well can exploit a large payzone and do this in multiple runs, versus a straight vertical well that is screened for production in a narrow payzone.

We will be past Iraq and Iran in production in Texas alone in 2015+. Getting crude output greater than Russia or Saudi Arabia will take up to doubling the current production. If that happens, we will have to sell crude oil as the U.S. demand will be overtaken. One unfortunate thing though, is we don't have enough refining capacity to handle today's demand and therefore have to import refined products and will do so in the future even though we will have enough crude oil to surpass US demand.

Are the refiners afraid to risk the money when rule changes and government difficulties could make then stranded assets?

Under current law is it illegal to export crude, but not refined product? So if we had the capacity we could export value added distillates to Europe or Asia for example?

Ha

 

[aja8888]

^^^ Nice post and some gloom and doom points, for sure. However, the article was commented on by government and academia with no industry representation. They still dump on nuclear when it is very safe these days. Ask the French who's entire country is on nuke power.

Very little was said about the fact that the grid system across the U.S. is also a patchwork of all kinds of equipment and transformers. When Hurricane IKE roared through here a few years ago, most of Houston was without power for nearly three weeks. Not because we couldn't generate power, but the local grid was torn apart. We must have had 25 power companies working on putting it all back together. And the local power company sure made it clear that the cost of the work will be added to your bill once they figure it out (which I believe they still are trying to).

Windmills and solar are pipe dreams and even Boone Pickens gave up on it after he lost several billion of his personal dollars. We do have a large windfarm near Sweetwater, Texas, but the energy it generates is not free as those big windmills are very costly to operate and maintain.

But, like other utility costs, increases are inevitable.

 

[brewer12345]

Are the refiners afraid to risk the money when rule changes and government difficulties could make then stranded assets?

Under current law is it illegal to export crude, but not refined product? So if we had the capacity we could export value added distillates to Europe or Asia for example?

Ha

It is illegal to export crude without a permit. Permits are not forthcoming. Refined products can be freely exported and exports have been rising rapidly.

The challenge for refiners is that nobody wants a giant refinery in their back yard. Permitting and whatnot takes years and is uncertain. However, Kinder Morgan and the like have been building micro-refineries to produce "light oil." Light oil is the least refined thing you can export, and I am lead to understand the stuff being built is closer to a still than a refinery.

 

[haha]

I use old school paper Ha, but I found it on the online version here in STL Post Dispatch

U.S. electricity prices may be going up for good
Los Angeles Times
May 3, 2014 11:00 PM
LOS ANGELES • As the temperature plunged to 16 below zero in Chicago in early January and record lows were set across the eastern U.S., electrical system managers implored the public to turn off stoves, dryers and even lights or risk blackouts.

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Thanks very much Muilligan. I think we need to have higher electricity and natural gas prices, to keep ups from going off on a building boom of eventual energy white elephants like 4000 sq ft houses. It would be painful, but the Europeans manage it so likely we can too. It also makes living in forgiving climates like coastal California a bit cheaper, since heating and cooling are both minimal in many places. When I lived at the beach I never even noticed my gas bill, I had only a wall mounted gas burner and of course no cooling. I guess farther inland one might want a small heat pump system.

It is illegal to export crude without a permit. Permits are not forthcoming. Refined products can be freely exported and exports have been rising rapidly.

The challenge for refiners is that nobody wants a giant refinery in their back yard. Permitting and whatnot takes years and is uncertain. However, Kinder Morgan and the like have been building micro-refineries to produce "light oil." Light oil is the least refined thing you can export, and I am lead to understand the stuff being built is closer to a still than a refinery.

Thanks Brewer.

Don't blame the Nimby's. I used to live farther north, and on some days the north wind from the refineries at Cherry Point could just about make you gag. I think they are much cleaner now though.



Ha

 

[Mulligan]

I must admit I haven't followed solar too much over the years, but all I have read is that the price has came down considerably the past few years. Based on the paper this morning it appears ( at least in our area) it needs to come down quite a bit more to make it economically feasible. The article featured a man taking advantage of utility tax credits to install solar panels on his home said break even point would be 8-10 years. But then he admitted if utility wasn't paying for half of it, ( courtesy of a limited mandated credit program that is subsidized by 1% increase in utility bills for everyone) it would not be worth it and too expensive. I am sure kilowatt rates per area range significantly throughout the country and ours is around 8 cents to 11 cents depending on the season for residential.


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[aja8888]

I must admit I haven't followed solar too much over the years, but all I have read is that the price has came down considerably the past few years. Based on the paper this morning it appears ( at least in our area) it needs to come down quite a bit more to make it economically feasible. The article featured a man taking advantage of utility tax credits to install solar panels on his home said break even point would be 8-10 years. But then he admitted if utility wasn't paying for half of it, ( courtesy of a limited mandated credit program that is subsidized by 1% increase in utility bills for everyone) it would not be worth it and too expensive. I am sure kilowatt rates per area range significantly throughout the country and ours is around 8 cents to 11 cents depending on the season for residential.


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Unless you are bound and determined to use solar panels or other means to reduce power consumption, a homeowner will be better off financially (and time/investment wise) by just evaluating his power consumption use and making efficient changes accordingly.

As an example, we ran a fridge in our garage as an extra that we bought new in 1976 for several years. When I measured the power consumption of that fridge I was shocked to find out it drew many times more current than a new, energy efficient one. Out it went and was replaced by a smaller, more efficient one.

 

[ERD50]

... We do have a large windfarm near Sweetwater, Texas, but the energy it generates is not free as those big windmills are very costly to operate and maintain. ...

I thought that wind was actually pretty inexpensive regarding on-going costs?

But the problem with wind (and solar, see below), is that it is intermittent, the cost of producing electricity is only part of the equation. Once it becomes a significant part of the grid, it puts more burden on the other peaker sources to fill in the dips. Those costs should really be allocated back to solar/wind, but they are mostly getting a free ride now, but that could change.

I must admit I haven't followed solar too much over the years, but all I have read is that the price has came down considerably the past few years.

.... solar panels on his home said break even point would be 8-10 years. But then he admitted if utility wasn't paying for half of it, ( courtesy of a limited mandated credit program that is subsidized by 1% increase in utility bills for everyone) it would not be worth it and too expensive. ...

Right. The subsidies mean many pay for a few. That doesn't work when you go for large scale implementation. Or the way I like to say it, subsidies don't change the cost effectiveness or ROI, they only change who pays for it. It's a shell game, not a 'solution'.

So like I said above, large scale solar/wind has to include any additional costs for peaker and/or storage, and that raises the price (and environmental impact).

The good news is, the technologies keep improving, and even if it is more expensive, it at least provides a cap for energy prices.

-ERD50

 

[ERD50]

...

As an example, we ran a fridge in our garage as an extra that we bought new in 1976 for several years. When I measured the power consumption of that fridge I was shocked to find out it drew many times more current than a new, energy efficient one. Out it went and was replaced by a smaller, more efficient one.

Good that you actually measured it. I keep seeing articles and PSAs saying to replace any old fridge/freezer, no ifs/ands/buts. Well, we have a 1992 fridge and a 1980's freezer. True, they use more juice than a new one, but not so much in absolute terms. The old fridge uses maybe $3 more per month. I'm not throwing a working unit in a landfill, and spending $700 to 'save' $36/year. I also have a little more faith that those old units will continue to run for another decade than I do in a new one running for 10 years. They are proven units!

-ERD50

 

[Mulligan]

Unless you are bound and determined to use solar panels or other means to reduce power consumption, a homeowner will be better off financially (and time/investment wise) by just evaluating his power consumption use and making efficient changes accordingly.



As an example, we ran a fridge in our garage as an extra that we bought new in 1976 for several years. When I measured the power consumption of that fridge I was shocked to find out it drew many times more current than a new, energy efficient one. Out it went and was replaced by a smaller, more efficient one.

I will get my first crack at this with my metal roof I installed a few months ago. Supposedly it will save 15% on summer utility bills due to the reflection of heat away from the attic area. I doubt I ever really will know for sure what savings I get because our summer temperature ranges vary considerably year to year, so comparing last year to this years bill probably will not be a meaningful comparison.


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[aja8888]

Good that you actually measured it. I keep seeing articles and PSAs saying to replace any old fridge/freezer, no ifs/ands/buts. Well, we have a 1992 fridge and a 1980's freezer. True, they use more juice than a new one, but not so much in absolute terms. The old fridge uses maybe $3 more per month. I'm not throwing a working unit in a landfill, and spending $700 to 'save' $36/year. I also have a little more faith that those old units will continue to run for another decade than I do in a new one running for 10 years. They are proven units!

-ERD50

I measured its consumption using a Killowat meter and called Entergy (they won't post my rate on the bill) to get the cost per KW. We (Entergy and I) figured it was costing about $10/month to run that old unit. Even though it ran well, the door seals were dried out causing it to run more frequently and defrost water was running onto the garage floor.

Let's say it was at the end of its "efficient" life and although still working, it was time for the next user. We gave it away (it's still running two years later) and bought a unit for ~ $350 that is about 1/2 the size and much more efficient.

So, the payback is about three years, which is respectable. And it takes up 1/2 the space.

Since we now are on water use rationing here in south Texas, my next project is to fine tune my sprinkler system for the most efficient use of water.

 

[Mulligan]

I will get my first crack at this with my metal roof I installed a few months ago. Supposedly it will save 15% on summer utility bills due to the reflection of heat away from the attic area. I doubt I ever really will know for sure what savings I get because our summer temperature ranges vary considerably year to year, so comparing last year to this years bill probably will not be a meaningful comparison.


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Maybe this metal roof will save me some money. Today is the first real warm humid sunny day. It's currently 90 outside and inside house temperature has only raised from 69 to 72 since I got out of bed.


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